Freddie Mac 2015 Annual Report Download - page 16

Management's Discussion and Analysis Consolidated Results of Operations | Comparison
Freddie Mac 2015 Form 10-K 14
CONSOLIDATED RESULTS OF OPERATIONS
You should read this discussion of our consolidated results of operations in conjunction with our
consolidated financial statements and accompanying notes. See “Critical Accounting Policies and
Estimates” for information concerning certain significant accounting policies and estimates applied in
determining our reported results of operations and Note 1 for information on our accounting policies.
The table below compares our consolidated results of operations for the past three years.
Year Ended December 31, Change 2015-2014 Change 2014-2013
(dollars in millions) 2015 2014 2013 $ % $ %
Net interest income $ 14,946 $ 14,263 $ 16,468 $ 683 5 % $ (2,205) (13)%
Benefit (provision) for credit losses 2,665 (58) 2,465 2,723 (4,695)% (2,523) (102)%
Net interest income after benefit (provision) for
credit losses 17,611 14,205 18,933 3,406 24 % (4,728) (25)%
Non-interest income (loss):
Gains (losses) on extinguishment of debt (240)(422) 446 182 (43)% (868) (195)%
Derivative gains (losses) (2,696) (8,291) 2,632 5,595 (67)% (10,923) (415)%
Net impairment of available-for-sale securities
recognized in earnings (292) (938) (1,510) 646 (69)% 572 (38)%
Other gains (losses) on investment securities
recognized in earnings 508 1,494 301 (986) (66)% 1,193 396 %
Other income (loss) (879) 8,044 6,650 (8,923) (111)% 1,394 21 %
Total non-interest income (loss) (3,599) (113) 8,519 (3,486) 3,085 % (8,632) (101)%
Non-interest expense:
Administrative expense (1,927) (1,881) (1,805) (46) 2 % (76) 4 %
REO operations (expense) income (338) (196) 140 (142) 72 % (336) (240)%
Temporary Payroll Tax Cut Continuation Act of
2011 expense (967) (775) (533) (192) 25 % (242) 45 %
Other (expense) income (1,506) (238) 109 (1,268) 533 % (347) (318)%
Total non-interest expense (4,738) (3,090) (2,089) (1,648) 53 % (1,001) 48 %
Income before income tax (expense) benefit 9,274 11,002 25,363 (1,728) (16)% (14,361) (57)%
Income tax (expense) benefit (2,898) (3,312) 23,305 414 (13)% (26,617) (114)%
Net income 6,376 7,690 48,668 (1,314) (17)% (40,978) (84)%
Total other comprehensive income (loss), net of
taxes and reclassification adjustments (577) 1,736 2,932 (2,313) (133)% (1,196) (41)%
Comprehensive income $ 5,799 $ 9,426 $ 51,600 $ (3,627) (38)% $(42,174) (82)%
Key Drivers:
• Net interest income increased in 2015 compared to 2014, primarily due to an increase in
management and guarantee fee income and amortization of upfront fees and basis adjustments as a
result of higher prepayment rates. This increase was partially offset by a reduction in the amount of
contractual net interest income derived from our mortgage-related investments portfolio, as this
portfolio has continued to decline pursuant to the portfolio limits established by the Purchase
Agreement and by FHFA. Net interest income decreased in 2014 compared to 2013, primarily due
to a reduction in our mortgage-related investments portfolio and less amortization of upfront fees and
basis adjustments as a result of lower prepayment rates. See “Net Interest Income” for more
information.
• Benefit (provision) for credit losses was a benefit in 2015 and was driven by the reclassification of
loans from held-for-investment to held-for-sale. Excluding the effect of the reclassification of loans,